The company’s balance sheet strength is underpinned by strong risk-adjusted capitalisation, in spite of elevated investment risk due to a high level of equity and real estate holdings (approximately 80% of total invested assets at year-end 2016). Although the company is seeking to selectively de-risk its investment portfolio, A.M. Best does not expect this to have an impact on MEICO’s balance sheet strength assessment over the short term. In A.M. Best’s opinion, MEICO’s concentrated investment portfolio exposes its capital base to potential volatility. Other offsetting rating factors include the lack of an asset-liability management strategy and the company’s high reinsurance dependence, which is partially mitigated by a financially strong reinsurance panel.

MEICO has a history of robust operating results, supported by good underwriting performance and evidenced by a five-year average return on equity (ROE) of 8.7% (2012-2016). The company’s investment results have been volatile. In 2016, MEICO generated an ROE of 11.5% that was primarily driven by material realised gains from the disposal of assets. The company’s combined ratio deteriorated slightly to 93% in 2016 (2015: 89%), mainly due to claims related to legacy property business and continued negative pressure on reinsurance commissions. A.M. Best expects MEICO to generate an annual ROE in the mid-single digit range between 2017 and 2019, as a result of good underwriting profitability. However, the potential for significant volatility in investment results remains, which could materially impact the company’s prospective ROE.

Although MEICO has a good competitive position within Jordan, this remains a relatively small market. In 2016, the company’s gross written premiums grew by 7% to JOD 41 million, mainly driven by its medical and motor accounts. MEICO’s gross portfolio is well-diversified by line of business, but it is significantly concentrated on motor insurance on a net basis. The majority of the company’s premiums emanate from an extensive direct sales network across Jordan. Prospective growth is likely to be driven by medical business.

Although the company’s ERM is considered to be appropriate, its risk profile is significantly increased by its relatively high-risk investment strategy. ERM, capital management and catastrophe modelling are viewed by A.M. Best to be unsophisticated.